Morning Report: The Urban Institute examines manufactured housing 9/18/18

Vital Statistics:

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S&P futures 2899 3.25
Eurostoxx index 377.35 -0.96
Oil (WTI) 69.63 0.75
10 year government bond yield 3.01%
30 year fixed rate mortgage 4.68%

Stocks are higher after Trump’s proposed tariffs against China were smaller than expected. Bonds and MBS are flat.

Same store sales increased 5.4% last week, continuing a string of strong reports. Consumption data suggests that the fourth quarter is going to be strong, supported by the best holiday shopping season since the recession.

Builder sentiment was unchanged in September, according to the NAHB Housing Market Index. A lack of construction workers and higher construction costs are offsetting a strong seller’s market for new homes.

The credit markets for corporations with speculative credit remains robust. A Blackstone-led investor group raised $13.5 billion for a 55% stake in Reuters data business. Huge leveraged buyouts have been largely absent since the financial crisis, and the covenants are extremely borrower-friendly. Aside from the RMBS shenanigans of the 06-07 era, we saw a lot of reaching on leveraged buyout deals (LBO firms buying non-LBO friendly businesses like semis and retailers). In fact, the first indication of a problem in the credit markets in 06 was when the buy side refused to bite on the paper issued to fund the Alliance Boots transaction (an LBO of a British drug store chain). The banks got stuck with the inventory, and the rest is history.

With LBO credit widely available, you would think the private label MBS market would be coming back. So far, it is a shadow of its former self, with a number of issues (prepays, conflicts) preventing it from returning in any size. If it can’t do so in this environment, it almost makes you wonder if it ever will.

A UBS strategist is out with a bold call that the Fed will take a break after September and skip tightening at the December meeting. He believes that trade war fears will keep the Fed cautious, and will not be as inflationary as feared.

new study by the Urban Institute finds that contrary to popular belief, manufactured homes appreciate in value, although at a smaller rate (3.4% annually versus 3.8% for tradition homes). They suggest that geographical differences could explain the difference – mannies are concentrated in slower growth states and are underrepresented in pricey markets like the California. Currently the government only finances mannies when the land is part of the deal, and since this study uses the FHFA House Price Index, they are excluding structure-only chattel loans, which are something like 80% of the market. Note that mannies are overall more volatile that site-built homes, which means more risk for the lender all things being equal and therefore justifies the LLPAs.

A couple of economists think they have found a profitable trading strategy around the Fed. The idea is to buy or sell the market after the Fed makes a surprisingly dovish or hawkish monetary announcement and then unwind the trade 15 days later. The trade provides a higher return without increasing risk (higher Sharpe ratio). Something to think about ahead of next week’s FOMC announcement. If the dot plot comes out a bit more dovish than expected, supposedly you can make some money buying some SPYs and unwinding the trade mid-October. Full disclosure, not recommending you do that, just saying the study says it should work.

 

34 Responses

  1. So apparrently Kavanaugh’s accuser isn’t willing to testify unless the FBI, which has no jurisdiction and has already declined to investigate, does a full investigation.

    https://www.mediaite.com/tv/breaking-christine-fords-lawyer-says-she-wont-testify-until-fbi-investigates/

    Anyone still think this is something that should be treated seriously rather than as an obvious political smear job intended to derail the nomination? Grassley should call for a vote tomorrow and put an end to this lowlife charade.

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    • I’m starting to come around to your view.

      Having said that, having the FBI interview each of them under oath this week and then holding the hearing next week can be done. Unless she has more information to disclose about the location, date, and other particulars, that would be the extent of the “investigation”.

      The other alternative is to have her come up before the committee and actually go on record as refusing to testify under oath. That has value to the public as well.

      If they do end up testifying, I would want to hear from the therapist about the particular circumstances of the original incident being brought up and the therapists opinion of her veracity.

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      • jnc:

        If they do end up testifying, I would want to hear from the therapist about the particular circumstances of the original incident being brought up and the therapists opinion of her veracity.

        I don’t know the full ethics of it, but I would imagine that the therapist would not be able to testify without the consent of Ford. However, I wonder if consent, once granted, can be limited to just what Ford herself wants to reveal. It could open up all kinds of areas for questioning that Ford may not want to open (and yes, the R’s should go there). I wouldn’t count on the therapist being there.

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        • Oh I don’t think it will happen at all, but in my view once Ford made this public and specifically cited the therapist to bolster her account, then the privileged nature of the communications shouldn’t hold anymore.

          I also think that the therapist is probably one of the few in a position to judge her veracity. Assuming that the therapist would be willing to do so and isn’t themselves partisan on this.

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        • jnc:

          I also think that the therapist is probably one of the few in a position to judge her veracity.

          I don’t think her veracity is relevant. She could quite easily truly believe what she is saying and still be wrong or misremembering or mischaracterizing or even inventing the memory.

          But then again, I don’t even think whether or not it is true is relevant, either. An isolated drunken incident at the age of 17 is not a disqualifying event for literally any high level elected official. It shouldn’t be for SCOTUS, either.

          Liked by 1 person

        • “An isolated drunken incident at the age of 17 is not a disqualifying event for literally any high level elected official.”

          Is lying about it in the context of the current confirmation hearings a disqualifying event?

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        • jnc:

          Is lying about it in the context of the current confirmation hearings a disqualifying event?

          No, not in the context of a disingenuous, 11th hour ambush. Like I said, he was placed in a politically impossible, catch-22 situation. In the current environment, anything less than a full-throated denial would have made the continuation of his nomination politically impossible. So to say that it becomes relevant only because of that full-throated denial is itself a denial of political reality. It also enables such last second, smear job political tactics, which I refuse to do.

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        • I also think that lying about such an incident in any context should be far less disqualifying for SCOTUS than lying about one’s approach to Constitutional law, which literally every progressive on the Court has done.

          Liked by 1 person

        • Is lying about it in the context of the current confirmation hearings a disqualifying event?

          Given that he wouldn’t be confirmed if he admitted it, and that there is pretty much zero upside for him at this point, I wouldn’t particularly consider it disqualifying. The lack of context and rational thought means that it would essentially be an admission to being Hitler. Or, such an admission, in the media firestorm, would in most ways be more false than his dismissal.

          Which is not to say I think he’s lying. They may remember the situation two different ways. Either of their memories may be faulty, especially if both or either of them were drunk at the time. He may have decided it never happened and is sticking with that, to the point he could easily pass a polygraph as well.

          From a moral standpoint, I would see this as an obvious attempt to trash him and potentially damage or even ruin his life or career for partisan reasons. From people who I’m pretty sure would consider ensuring the ongoing access to abortion as a moral imperative that would allow them to do anything. So, I don’t think his “lying”–that is, applying a much gentler and defensive version of the strategy being clearly used against him–is beyond the pale.

          Why should it be okay and penalty-free for everybody else to lie about him, but he can’t do it defensively?

          Ideally, he would not lie, but ideally, he would not have to.

          Which, again, is not to say he’s lying. There’s a lot about this story that stinks and most of that stink is not coming from Kavanaugh, as far as I can tell, thus far.

          The desperate search through Mark Judge’s writings to find things that they believe are hidden references to the truth of this event reminds me a lot of the press going through Palin’s trash, looking for something–anything!–to prevent her from being a heartbeat away from the presidency.

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        • KW:

          From a moral standpoint, I would see this as an obvious attempt to trash him and potentially damage or even ruin his life or career for partisan reasons. From people who I’m pretty sure would consider ensuring the ongoing access to abortion as a moral imperative that would allow them to do anything. So, I don’t think his “lying”–that is, applying a much gentler and defensive version of the strategy being clearly used against him–is beyond the pale.

          We are in total agreement.

          Liked by 1 person

        • “No, not in the context of a disingenuous, 11th hour ambush.”

          Any distinction between lying about this not being disqualifying and Clinton lying about Lewinsky?

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        • jnc:

          Any distinction between lying about this not being disqualifying and Clinton lying about Lewinsky?

          I’m not sure I understand the point of the comparison. Clinton’s lies quite obviously did not disqualify him from the presidency. But to answer your question, Clinton did it under oath in the course of a civil trial, so his lies actually injured a third party within the context of the civil suit. Kavanaugh’s lie (if indeed it is) was not made under oath, has come in response to a transparently calculated political attack upon his nomination, and has not caused any harm to any third party in any way at all.

          In any event, this seems to be the catch-22 situation that you apparently are happy to allow the D’s to force him into: Assuming the allegations are true, they should not be relevant to his nomination, except to the extent that Kavanaugh is willing to perjure himself by denying it. So let’s put him under oath to see if he denies them. Of course, if he doesn’t deny them, then his nomination is politically finished and he will never be on SCOTUS. And if he does deny them, then he’s perjured himself and should be disqualified for having done so, and should never be on SCOTUS. So, again, despite thinking that the truth of the charges themselves is irrelevant to his nomination, you want to place him in a situation in which no matter what he says, his nomination is finished if they are true.

          And you don’t see this as enabling the pond-scum tactics of the D’s?

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        • “Why should it be okay and penalty-free for everybody else to lie about him, but he can’t do it defensively? ”

          So basically arguing for no standards at all vis-a-vis an obligation to tell the truth.

          My preference would be to get everyone under oath and ensure that there are penalties if they lie.

          Including this person:

          https://twitchy.com/gregp-3534/2018/09/19/woman-claimed-in-now-deleted-tweet-to-have-gone-to-school-with-christine-blasey-ford-and-said-the-incident-was-spoken-about-for-days-in-school/

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        • jnc:

          My preference would be to get everyone under oath and ensure that there are penalties if they lie.

          And you are going to know who is lying….how exactly?

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        • Cross checking the stories. The same way you always do.

          Also the previous link didn’t do the retracted tweet full justice. It’s even better than the synopsis:

          https://mobile.twitter.com/jaybookmanajc/status/1042386834284789760

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        • “Clinton’s lies quite obviously did not disqualify him from the presidency.”

          I believe it was the basis of one of the articles of impeachment.

          “And you don’t see this as enabling the pond-scum tactics of the D’s? ”

          Sure, but there’s no way around that while also addressing the substance of the accusation.

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        • jnc:

          I believe it was the basis of one of the articles of impeachment.

          Which failed.

          Sure, but there’s no way around that while also addressing the substance of the accusation.

          Which necessarily means that it isn’t Kavanuagh’s denial that makes the matter relevant, but is instead the substance of the accusation. We started the other day with me saying that the way in which this charge came about as a last minute smear makes it unworthy of taking seriously, and you said that it was Kavanaugh’s very denial that make it worthy of taking seriously, because he had “made it about his veracity”. You are now saying that it should be taken seriously in its own right. I absolutely disagree with that precisely because doing so enables and encourages the use of these kinds of sleazy political tactics. I think objecting to that is far more worthwhile than worrying about whether a SCOTUS judge might have groped a girl in a drunken stupor as a 17 yr old.

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        • “I believe it was the basis of one of the articles of impeachment.

          Which failed.”

          Sure, but that’s the standard that Republicans were holding Clinton to at the time.

          If it’s the case that it’s no longer the standard that’s worth upholding, then so be it but that applies to everyone.

          “I absolutely disagree with that precisely because doing so enables and encourages the use of these kinds of sleazy political tactics.”

          I don’t think it’s as widespread as you are assuming. Again, nothing like this came up with Gorsuch and Democrats were certainly just as motivated then to stop the nomination.

          I also think it’s more effective politically to go through the process and let the chips fall where they may than trying to preempt it.

          If Ford refuses to testify at this point, that basically undercuts the accusations and Kavanaugh gets confirmed.

          If she does testify and is found credible and Kavanaugh doesn’t get confirmed as a result, then there’s plenty of other judges who will make fine Justices without the baggage.

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        • jnc:

          Again, nothing like this came up with Gorsuch and Democrats were certainly just as motivated then to stop the nomination.

          I think you are dead wrong about that. Gorsuch was replacing Scalia, so not a balance-of-the-court changing nomination. But every time such potentially balance-shifting nomination arise, the D’s are extra motivated and these are precisely the sleaze-ball tactics that get pulled. There have been 3 such nominations in the last 40 years, Bork, Thomas, and now Kavanaugh. And every single one of them got smeared. This is in fact a virtual replay of the Thomas nomination.

          The D’s were quite upfront upon Kavanaugh’s nomination that they would pull out any and all stops to prevent it. And so they have.

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        • “I think you are dead wrong about that. Gorsuch was replacing Scalia, so not a balance-of-the-court changing nomination.”

          Didn’t matter. It was a Trump nomination for the seat that was “stolen” from Merrick Garland.

          The tactic of sexual harassment/assault allegations isn’t generally used against every nominee, unlike say the usual rhetoric about overturning Roe, bringing back back alley abortions, etc.

          On the other hand, since they can potentially run out the clock here unlike with Gorsuch, that could well be a factor in throwing everything against the wall.

          Liked by 1 person

        • On the other hand, since they can potentially run out the clock here unlike with Gorsuch, that could well be a factor in throwing everything against the wall.

          I think that’s it. They think they can run out the clock, get the senate, and just torpedo him and every subsequent Trump nominee that way.

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        • jnc:

          Didn’t matter. It was a Trump nomination for the seat that was “stolen” from Merrick Garland.

          So? The fact that they were both Trump nominations doesn’t mean that D’s couldn’t have been more motivated by one than the other for a non-Trump related reason.

          The tactic of sexual harassment/assault allegations isn’t generally used against every nominee…

          I know. Like I said, the real smearing seems to be reserved for those spots that are potentially transformative for the court.

          On the other hand, since they can potentially run out the clock here unlike with Gorsuch, that could well be a factor in throwing everything against the wall.

          Agreed, that too is a factor.

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        • @scottc1:
          I also think that lying about such an incident in any context should be far less disqualifying for SCOTUS than lying about one’s approach to Constitutional law, which literally every progressive on the Court has done.

          This is an excellent point. To some extent they all lie or at least dissemble. Like most people do, to some extent, in a job interview where they know something they consider irrelevant might cost them a job.

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        • @jnc4p: “So basically arguing for no standards at all vis-a-vis an obligation to tell the truth.”

          In a fair, just, and objective forum I’m fine with an obligation to tell the truth, particularly where that truth is relevant.

          I’m not remotely convinced this is the forum for this discussion, nor do I see it as the place for this to be adjudicated, nor do I think this is being brought forward in good faith out of legitimate concern for how Kavanaugh’s alleged behavior, imperfectly remembered by an accuser of convenient timing.

          Standards are only useful if most everybody mostly adheres to them. They cease to be a net positive when there are groups of people willing to use the advantage of flouting standards their opponents adhere to to defeat them.

          If standards were in play, I have a hard time believing this would be playing out like it is, and that an 11th hour accusation of something done 30 years ago would be something suddenly demanding of senate hearings and FBI investigations.

          I don’t know that he’s lying, but if he is, why in the hell shouldn’t he?

          Regarding Clinton, I think I’m on record as saying his impeachment was nonsense and the perjury trap as being an obvious trap, political, and not done in good faith. It would have made a lot more sense to me to go after him for having manipulated Lewinski for his sexual gratification, given the disparity of their positions, than to nail him for lying about having done it at all.

          Though I don’t think there should have been a special prosecutor for Whitewater. But that’s a different tangent . . .

          Like

      • From the article:

        But this isn’t all politics.

        The author is full of shit on that one. This is only about politics.

        Liked by 1 person

      • Judge’s entry in his senior yearbook provides grounds to doubt his denials. It includes this quote from playwright Noël Coward: “Certain women should be struck regularly, like gongs.” So it’s worth pressing Judge about the extent of his uncertainty. And it’s worth asking Kavanaugh why he’s more confident than Judge.

        This is the Palin-style trash-sifting. They are pulling this sh*t from Judge’s yearbook like it’s Twitter. WTF?

        But we have enough evidence to know one thing: The committee has a lot of leads to work with. It should get on with the job.

        Perhaps, but we don’t know they they should get on with the job.

        Although, on the plus side, I kind of think after all this if Kavanaugh does get appointed any liberal sympathies he might have had that could have turned him into a Bryer or a Kennedy will have been burnt away by his critics.

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    • Anyone still think this is something that should be treated seriously rather than as an obvious political smear job intended to derail the nomination

      Irrespective of whether it’s a smear job or the accuser is 100% serious and 100% believes her own story, the “FBI must investigate” is just crazy. Irrespective of intent, the whole charade should be dropped based on that. She’s been given her opportunity to testify and is declining, basically.

      Why in the world should the FBI investigate a 30 year old claim of potentially rapey behavior at a party nobody will confirm in any way?

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  2. Dude oughta know, he was in the shit in ‘Nam.

    Like

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